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The Value Is in the Data

Many Sam's Club suppliers still don't understand how Electronic Product Code systems and standards enable companies to improve the way they do business.
By Mark Roberti
Oct 13, 2008I hosted a webinar last week explaining how to tag sellable units for Sam's Club (see RFID Journal to Host Webinar on Tagging Sellable Units). We had approximately 120 people on the call, who asked a lot of questions. One question stood out, however: "What information will I get back from Sam's Club when I tag, other than the fact that the product has reached the wholesaler?"

I had been explaining that if you go beyond a slap-and-ship approach to complying with EPC RFID-tagging requirements, you could use the data you get back to create some value. Many on the call seemed surprised to learn suppliers would receive more information than just a confirmation their goods arrived. I told them suppliers would get back quite a lot of valuable data about where and when tags were read, as well as the business step involved.


It's somewhat surprising to me that Sam's Club's suppliers don't already know this. I know Sam's has a lot of suppliers that don't also supply to Wal-Mart. Still, it's been 10 months since Sam's Club told suppliers they would be required to tag pallets and sellable units (see Sam's Club Tells Suppliers to Tag or Pay, Sam's Club Letter Shakes Things Up and Tagging Sellable Units). That's a lot of time to do some research.

True, it's a challenge for Sam's Club and Wal-Mart to educate suppliers and the broader community regarding the value of the data without giving away their competitive advantage. RFID Journal faces a similar challenge, because many suppliers getting value won't speak about it since they don't want to give away their competitive advantage.

But Wal-Mart and other suppliers have shared enough information to convince me of the value of EPC RFID. I'm more convinced than ever that the standards EPCglobal has created for using EPC RFID data are enormously important. With the data standards, you don't just know a tag was read, you also know when and where that reading occurred, and the business process involved—as well as, potentially, the product's condition (it's current temperature, for instance). So you not only know your product arrived at the distribution center, but also when it was shipped to—and arrived at—a store.

More specifically, Wal-Mart suppliers know when a case moved from the back of the store to the storefront. Sam's Club, I believe, will provide data regarding which shelf on the sales floor a particular pallet is on. (For those who don't shop at Sam's, it contains large warehouse-like racks, with products available for replenishment stored on high shelves rather than in storerooms.)

USER COMMENTS

William James 2008-10-17 01:43:59 PM
Sam's Club, Data and Tagging Another good overview by Mark Roberti on what will eventually be a pervasive use of RFID with respect to item level tagging and visibility into the supply chain. There is one point I'd like to comment on and it has to do with the cost of the tag. I'm going to make a bold statement and it's this, the cost of the tag, within reason relative to a products value being tagged is irrelevant. Currently, reasonable estimates for the cost of Out of Stocks alone are a $120B, yes Billion, problem in the Retail supply chain and average 8% across the board, that's 1 out of 12 products being out of stock at any given location. The opposite problem is Over Stocks at $60B and shrinkage adding an additional $40B to the problem set. So as they say, a billion here and a billion there it starts to add up. The other challenge for the manufacturers is they get marginalized or no data from the retailer in the form of POS reports. On average only 4% of merchandise planners actually use POS data to drive product ordering forecasts. And only 9% of retailers on average use real time data to review sales receipts and drive stocking decisions. Dr. Thomas Gruen at the University of Colorado in a study they did there in 2007 determined that OOS casues were due to: 47% of poor visibility to in-store forecasting, 25% of the time the product is in the store but not on the shelf and 28% it is due to upstream causes involving things like lack of materials, shipping and logistics problems, weather and other causal affects. So given the amount of risk that manufacturer's and retailers take on what causes them the most pain is the last 50 yards in the store to the shelf. And this is exactly where item level tagging can reap rich ROI rewards. The question and answer is both hard and easy. What would retailers give to have exactly the right product on the shelf at the moment of truth when the consumers want that product? Answer is everything. If the products are not there neither makes a sale. That's the easy part. The hard part is who will invest in a solution to solve that problem? The retailer? The CPG? The answer is both should invest because to Mr. Roberti's point, they will jointly reap rich rewards once they begin to understand how the data can be used in their business to drive cost efficiencies, sustainability programs and remaining competitive in these fiscally challenging times. Every day, 100,000 people leave a WalMart* because what they went in to buy wasn't in the store. That's 100,000 trips in by car. The cost of gasoline alone is mind boggling not withstanding that a sale didn't take place. So to all the manufacture's and retailers out there, be bold, collaborate with a retailer and a product and launch an initiative to get item level tagging going and gaining visibility to YOUR INFORMATION. And if you need any help we here are ready to assist as appropriate. Sincerely, Bill James Vice President www.seeonic.com 612.281.1089

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